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MLG saw the future with PPV events for SC2 in 2012, but the execution was misguided

At the beginning of 2012, MLG decided to do something bold: Make running StarCraft 2 tournaments more financially viable.

To do this, the company introduced Arena tournaments. It’s hard to know the exact philosophy or method without working for them, but I believe the premise of these tournaments was to find some long-term solution to running esports tournaments.

For tournament organizers, I know four types of revenue: Broadcasting, sponsorships, merchandising and ticket sales. MLG’s bread and butter was the weekender tournaments it had done for ages, and they probably felt that they were in a position to expand. So with SC2 being in its prime as a spectator esport, MLG tried to capitalize. It created the Arena tournaments that had a price tag of $20. They weren’t even the first to do it, as GSL had been running expensive packages for higher quality streams and VOD services since its inception.

The grand experiment failed as MLG stopped doing them after the fourth iteration of the Arena event. Nearly four years later, I think they were right. They just did it the wrong way.

The creation and popularization of streams meant two things for viewers. It was easy to reach live video content, and it was free. This created a culture where charging for watching was an anathema, and after the initial novelty, it wore off. It also didn’t help that there were a multitude of free tournaments (including some by MLG) during that time.

In a similar line, GSL’s revenue stream of selling these expensive packages was eventually cut, as Blizzard and WCS took over the ecosystem and GSL was forced to give out free high-quality streams and VODs to everyone.

At the time, I didn’t think either MLG or GSL were wrong. Depending on only sponsorships to fuel a spectator game was shortsighted because that’s directly tied to the popularity of the game. If the popularity ever declined, then some tournaments would have to be cut. We can see that in action in this year’s WCS circuit, where there are fewer tournaments across the board both domestically and abroad.

There were four problems. First, they sold it wrong. From the community perspective, they were charging for a service everyone else was giving out for free. Secondly, SC2 had been hit multiples times like a punching bag for money. Multiple donor drives made runs at the SC2 community, and Richard Lewis wrote about it in his Broken Promises series. While he was painted as a villain, in the end the silent majority agreed with his evaluation and the SC2 community became more and more wary of passion projects asking for money. Third, SC2 came out before The International 3 changed the way publishers got revenue from its player base. Finally, the game design itself didn’t have any of the features ready to take advantage of this new wave of micro-transactions as it came out too early.

Valve was hugely successful with Dota2 and Counter-Strike. At TI3, they introduced the compendium, which allowed crowdfunding for the event itself. CS:GO, on the other hand, created virtual skins that helped push the casual player base and spectator viewership up. In addition to that, they included stickers and signatures at the Major to directly support teams and players. The combination of these ideas created a whole new revenue model for video games, one where publishers created content casual players wanted to buy while supporting the competitive side of the scene.

Nearly every esports publisher saw the advantages of this new model except for Riot Games, which called the crowdfunding “unsustainable” and “begging for money from the community.” Three years later, they changed their tune.

What is amazing about this model is that its sustainability is dependent on fan interest. The fans themselves are mini-sponsorships, ones who don’t care about viewership as much as the product itself. We’ve seen it used in multiples games like Smite, Street Fighter and Smash.

When I think about what MLG and GSL tried to do, I can’t help but think it was regrettable. They weren’t wrong in trying to make money off running tournaments. If they had been successful and made a successful way to get fans to pay for watching tournaments, perhaps there could be a more robust SC2 scene this year.